Pegatron CEO Tips Possibility of Mid-Priced iPhone

Apple and "cheap" go together like water and oil, and the prospect of a low-end plastic iPhone has the company's loyal followers cringing. For those murmuring "say it isn't so," it probably isn't -- at least not if the reported remarks of Pegatron CEO Tong Zixian can be taken at face value. Apple may indeed produce a lower-cost iPhone, but it will not be cheap, he told shareholders.

The long-rumored lower-cost iPhone may indeed be on its way, but it might belong in the mid-tier rather than in the budget category, according to one of Apple's suppliers.

Pegatron CEO Tong Zixian told shareholders Thursday that Apple would likely launch a more affordable iPhone along with its next-generation device later this year, but that the price tag wouldn't be "cheap," according to a China Times story via the Japanese blog Mac Otakara.

Zixian's remarks suggest that Pegatron, which has reportedly begun bolstering its workforce for the second half of the year, is doing most of the manufacturing for the lower-end model.

Neither Apple nor Pegatron responded to our request to comment for this story.

Willing to Compromise?

The comments add fuel to the rumors that Apple will debut more than one iPhone model at its next product launch. It reportedly is looking into ways to target consumers in emerging markets who want the iPhone experience but can't afford the premium price.

That's a tall order for Apple -- or any other vendor -- to fill, said Ramon Llamas, a research manager with IDC's mobile phones team.

"It's tough to go at a much lower cost than they have currently without making some important changes," he told MacNewsWorld. "Even if you replace the glass and aluminum with plastic, you're still paying for a microprocessor, the display, the operating system, and so many other parts that are not inexpensive. If a supplier can make all those things really cheaply, I'll show you an iPhone that is probably going to shortchange people in quality."

For vendors that have traditionally offered electronic devices across the price spectrum, a disparity in quality between differently priced models is to be expected. Apple, however, releases just one iPhone model at a time, which it represents as the best product on the market.

It isn't likely to compromise by releasing a device that doesn't live up to consumer expectations, said Llamas.

In addition, any new phone Apple launches this year will come with the recently redesigned iOS 7. It could be a big gamble to debut the upgraded operating system on two different models, said Llamas, especially after the company took so much heat for iOS 6 stumbles -- notably Apple Maps.

"There is so much riding on iOS 7, that it seems like a big gamble to try to release more than one product with this completely new software," Llamas said.

Finding a Happy Medium

Still, the cutthroat smartphone market is only getting more competitive, and Apple could intend to release a device that would give it a better chance against some of the increasingly popular Android phones out there, said Colin Gibbs, analyst at
GigaOM Pro.

"Offering a mid-tier iPhone could benefit Apple in a couple of ways," he told MacNewsWorld. "It gives Apple a way to compete against mid-tier Android handsets with a brand new model rather than older models, and it wouldn't jeopardize Apple's brand the way a low-end iPhone might."

Even if it didn't target the most budget-constrained consumers, it could be a device that would appeal to them in a few years, when the phones would likely be sold secondhand for a cheaper price, said Gibbs.

"The iPhone 4 has given Apple a big boost in some of those markets," he pointed out, and "a mid-tier iPhone could become very affordable as it ages -- and that could become a major weapon for Apple over the next few years."

The stakes for Apple are no less than iPhone's status as a premier phone, and that's likely something the company will carefully guard.

"If they're really going to go with a low-cost model, the experience is going to be so different than what it [now] offers -- and really with what else is out there," he noted. "At what point does the significance of profitability exceed that of delighting your customers?"